Is Investing in Shroom Stocks a Good Idea?

By Kirsteen Mackay

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Shroom stocks, otherwise known as psychedelic stocks, present an early-stage investment opportunity that could result in mainstream health treatments.

Psychedelics include psilocybin (the hallucinogen present in magic mushrooms), LSD, DMT, ayahuasca, ketamine and more. The term shroom stocks is slang for publicly traded companies involved in the research and development (R&D) of psychedelic compounds.

Psychedelic Stocks Hope to Treat Mental Health

The reason for the rise in popularity of shroom stocks is primarily their potential to treat poor mental health.

Mounting cases of depression, PTSD, anxiety, OCD, eating disorders and addictions have shone a light on the need to help those suffering. Furthermore, the COVID-19 pandemic compounded the mental health threat to society as loneliness and isolation exacerbated psychological struggles, and suicide rates soared.

Psychedelic therapies offer potential relief from many of these debilitating conditions. But as hallucinogenic drugs have been illegal since the 1960s, progress in researching their potential has been hampered. 

Thankfully this is beginning to change. Scientific start-ups are being granted permission to carry out research into specific compounds and psychedelic therapies. 

There are also rumblings of decriminalization as Oakland (California), Denver (Colorado), and Santa Cruz (California) became the first US cities to decriminalize magic mushrooms. It's also widely believed that the recent acceptability of cannabis has eased wariness around the use of psychedelics.

Nevertheless, getting a Schedule I substance to a clinical trial is no mean feat. The regulatory and compliance hurdles are as hard as can be. But persistence seems to pay off, and the rise of psychedelic-themed start-ups ignites hope for a brighter future.

Click here for a list of popular shroom stocks and ETFs.

In 2018, Compass Pathways (NASDAQ: CMPS) received US Food and Drug Administration (FDA) approval of "breakthrough therapy" status for a psilocybin treatment they developed for treatment-resistant depression.

In the same year, the US FDA also approved SPRAVATO®, an esketamine nasal spray developed by Johnson and Johnson (NYSE: JNJ) for use in patients suffering from treatment-resistant depression. Esketamine is a chemical relation of the anesthetic and party drug ketamine. 

Then in 2019, Usona Institute received US FDA "breakthrough therapy" status for a psilocybin treatment for major depressive disorder (MDD).

Will the FDA approve psilocybin by 2030?

Of all psychedelic drugs, psilocybin is reported to have the most favorable safety profile. Therefore, it's deemed the most likely to gain widespread approval. That approval process is likely to take a long time, but now the ball has started rolling, speculation abounds that the US FDA will approve psilocybin by the end of the decade, maybe sooner.

How Can Psychedelics Help Mental Health?

Psychedelics affect a person's mental state by inducing hallucinations. The hallucination can be mild or deeply intense depending on the level of hallucinogen ingested. This can result in moments of clarity, self-awareness, and a change in emotion.

While tales of transformational experiences have been doing the rounds for decades, increasing academic research supports the belief that psychedelics can give individuals enough of a profound experience to shock their mental state into a new perspective. This can be sufficient to dramatically reduce symptoms of disturbed mental health by giving the patient the ability to forge better coping skills and thought patterns in everyday life.

However, some individuals are afraid of hallucinating. This has scientists asking, can psychedelics treat mental health without the need to hallucinate? Some believe they can, and certain shroom stocks are developing molecules based on psychedelics that provide the psychological benefits of the drugs without the hallucinations. If this can be done, many more people could potentially be treated.

Not Just Hallucinogens

Of course, the term "Shrooms" doesn't just refer to psychedelic mushrooms. There's also rising demand for other types of mushrooms believed to contain medicinal properties. Adaptogenics and nootropics are buzzwords referring to natural substances (plants and mushrooms) that enhance the mind and body. 

And companies are jumping on the trend to capitalize on the mounting demand for Lions Mane, Cordyceps, Reishi, Shiitake, Turkey Tail, Chaga, Maitake, and Agaricus. Individually and combined, these exotic-sounding species of mushrooms promise to alleviate all manner of health concerns while boosting immunity and cognitive performance.

Is Investing in Shroom Stocks a Good Idea?

So, the question remains 'Is Investing in Shroom Stocks a Good Idea?' That depends on your investing style. As shroom stocks are relatively new and don't have years of success to prove their worth, they can be accurately described as speculative investments.

Demand is undoubtedly there, from the growing mental health burden to the desire to improve our bodies and minds. But the regulatory process is arduous, and competition is intense. Many of these companies could well become success stories in time. But they face several headwinds, not least of which is the regulatory and legal minefield surrounding psychedelics.

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Topics:
Psychedelics
Life Sciences Tools and Services
Industries:
Healthcare
Companies:
Johnson & Johnson
Compass Pathways

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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